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Anti-Fraud Collaboration Releases New Case Study

"LDC Cloud Systems" fosters understanding of how global fraud situations can unfold

LAKE MARY, Fla. (Oct. 10, 2017) — To illustrate how increasingly complex accounting practices can leave a company susceptible to fraud, the Anti-Fraud Collaboration has released an insightful case study exploring the root causes and impact of bribery and accounting abnormalities.

This is the latest in a series of hypothetical case studies that focus on deterrence and detection of real-world financial fraud. It was produced through a collaboration of the Center for Audit Quality, Financial Executives International (FEI), The Institute of Internal Auditors (IIA), and the National Association of Corporate Directors (NACD).

The new case study features fictional LDC Cloud Systems, a rapidly growing global technology company whose board must contend with bribery allegation and poor accounting oversight. The scenario is designed to provide a greater understanding of how fraud situations can unfold and be addressed, including the importance of strong board oversight. It also explores actions of management and the board in-depth, providing a timeline of decisions as problems are uncovered.

“For internal audit, this case study provides powerful insight into the challenges even highly competent functions face when confronting complex risks that are compounded by deceptive actions within a company,” said IIA President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA. “It also shows the importance of being adequately resourced to address such risks.”

Case studies are geared for classroom use, with instructors guiding participants in a discussion of what could have been done to address or help avoid the situation. Each case study offers a companion discussion guide for instructors, available on request. The Anti-Fraud Collaboration also created a complementary video series to bring scenes from the LDC Cloud Systems case study to life. The videos are available at the Anti-Fraud Collaboration website.

“The Anti-Fraud Collaboration is pleased to present the latest case study in our series designed to raise awareness of financial reporting fraud,” said Center for Audit Quality Executive Director Cindy Fornelli, on behalf of the Collaboration. "These case studies have proven to be valuable educational tools for all members of the financial reporting supply chain, as well as students.”

“New technologies can make for a disruptive business environment, and can create new challenges on existing business practices,” said Andrej Suskavcevic, president and CEO of FEI. “Resources like this case study provide a practical tool to help financial executives explore issues that can help to deter financial reporting fraud.”

Added Peter Gleason, president and CEO of NACD, "Audit committees serve a critical role in ensuring the long-term value of their companies. This case study serves as a valuable resource to help audit committees think through their roles in providing oversight of their companies' financial controls and communications."

LDC Cloud Systems is the Collaboration’s fourth case study. The others:

  • Hollate Manufacturing focuses on understanding the conditions that can generate and perpetuate fraud and misrepresentation in financial reporting.
  • Carolina Wilderness Outfitters is intended to facilitate a discussion about how to conduct an internal investigation when fraud is suspected in an organization.
  • Kendallville Bank explores the importance of exercising skepticism as a participant in the financial reporting process.

About the Anti-Fraud Collaboration

The Anti-Fraud Collaboration represents the collaborative efforts of the Center for Audit Quality, Financial Executives International, the National Association of Corporate Directors, and The Institute of Internal Auditors, organizations that actively engage in efforts to mitigate the risks of financial reporting fraud. The Collaboration’s goal is to promote the deterrence and detection of financial reporting fraud through the development of thought leadership, awareness programs, educational opportunities, and other related resources specifically targeted to the roles and responsibilities of participants across the financial reporting supply chain.